Friday, September 13, 2013

IMF welcomes Pakistan plan to foster growth amid challenges

WASHINGTON, Sep 12 (APP): The International Monetary Fund has welcomed Pakistan’s economic program aiming to foster sustained and inclusive growth amid wide-ranging challenges.Releasing details of the September 4, 2013 Executive Board Meeting, which approved a three-year $ 6.64 billion package in support of Islamabad’s structural reform and growth program, the Fund said the directors highlighted the need for further consolidation.“While the 2013/14 federal budget represents an important initial step, a more efficient and equitable tax system is needed, and a significant increase in the tax-to-GDP ratio will be key to create room for social and investment spending while lowering the deficit,” the directors said in the backdrop of challenges and risks.According to a fund’s news release, directors assess that this will involve broadening the tax base and overhaul of tax administration.About the country’s economic performance, the Fund says GDP growth has averaged only 3 percent over the past five years, which is insufficient to significantly improve living standards or fully absorb the growing labor force.Severe problems with the electricity supply, a difficult security situation and the presence of loss-making public sector enterprises are among the factors for the below potential economic performance.“Directors welcomed the authorities’ new energy policy, which is geared to addressing long-standing problems that constitute the most critical constraint on growth and have generated large fiscal costs.”They encouraged the authorities to work closely with donors and secure broad-based support for the continued strong implementation of their energy sector strategy. Directors also called for efforts to liberalize the trade regime, restructure or privatize public sector enterprises, and improve the business climate to reduce rent-seeking behaviors and increase both foreign and domestic productive investment.At the same time, directors stressed that protecting the most vulnerable from the impact of fiscal consolidation and price adjustments is a priority.“They commended the authorities for their firm commitment to boosting targeted income support programs, and encouraged a gradual expansion of coverage and benefits as savings from energy tariff adjustments and fiscal space are realized.”